Russia foreign investors unfazed by rows with West

By Peter Apps - Analysis

LONDON (Reuters) - With oil at more than $125 per barrel and growth booming, foreign investors in Russia are finding it easy to turn a blind eye to the expulsion of U.S. diplomats and increasingly bellicose rhetoric over Georgia

Moscow expelled two U.S. military attaches on Thursday following the ouster in recent months of two Russian diplomats from Washington, with the United States also criticizing the war of words with neighbor Georgia.

A Georgian minister said his country was "very close" to war with Russia after its neighbor sent more troops to the breakaway Georgian region of Abkhazia, where separatist rebels said on Thursday they had shot down another pilotless Georgians spy drone.

Some investors said even if war were imminent -- rather than simply more rhetoric -- it might not be enough to put them off Russia as the country benefits from record oil prices in excess of $125 a barrel, pushing growth to 9.5 percent a year.

"Unless the Americans were to send peacekeepers to defend the Georgians I cannot see it having much of an impact," said George Nianias, chairman of Denholm Hall which has some $400 million in fixed income investments in Russia.

"Russia is too big, too important and too dangerous for the West to ever risk anything like that. You could see a local conflict with Georgia and the guns actually start to fire without it deterring anyone."

In contrast, Georgia has already suffered a ratings outlook downgrade from agency Standard & Poor's over rising tensions with its neighbor, and fellow ratings agency Fitch has warned any conflict -- unlikely though it is seen -- would lead to a downgrade for Georgia but not Russia.

RISKIER THAN BRAZIL?  Continued...